Skid / Sb9 you make good points. As mentioned previously I get a little frustrated with broker forecast models. Qantas are subject to very similar fundamental value drivers as AIR and I think its a better researched stock that AIR with higher quality analysis, (about 14 brokers in Australia analysing this stock IIRC) They're subject to extra competition from a range of carriers, the same fuel dynamics, similar young fleet and are a commodity based economy just like we are and are flying in a not dissimilar airspace. They have unions and older fashioned labour practices e.t.c. Broker consensus is $4.46 IIRC based on discounted cash flow models which appear to involve quite different sets of assumptions about the airline going forward. (brief re-cap, their EPS was 25 cps last year, AIR's was 29.1 cps - outlook guidance at their ASM wasn't as strong as AIR's) This to me suggests that based on best known current financial information to each airline AIR is likely to also beat QAN's eps in FY16. Further, AIR are on record as being very optimistic about their long term outlook. AIR are building economies of scale into their operation which means more of their growth will translate into bottom line profits. The wide spread in consensus valuation of AIR $3.03 and QAN $4.46 when AIR have beaten and look likely to continue to beat QAN's eps doesn't make a lot of sense to me.
Its all very well for people to get concerned about the entry of AA into the LA - AKL route but are people forgetting that AIR started their Singapore service about 11 months ago and are shortly starting two new routes with a further two pending sometime in the next 12 months ? A lot of the current SP action is sentiment driven in my opinion.
Just by way of a completely random sample to back up what you and I have suggested sb9 about growing demand for domestic services, yesterday I was very fortunate to catch my flight to Napier...I got the very last park at the regular Auckland public carpark after spending 20 minutes circling the entire place looking for one. Fortunately experience has always taught me to allow a spare 15 minutes over and above my estimated time to get to the airport to cover contingencies and I had already checked in for this flight online..even so we only just managed to board the aircraft before they closed the flight. Middle of the week, middle of the day a random ATR flight and it was absolutely full not a single spare seat. Why are so many people travelling these days ?...could it be because its so cheap they think nothing of flicking around the country for a good day / weekend or whatever away ?
People seem to be forgetting that American Airlines will grow the size of the market overall, not steal all its pax off AIR and they also forget that AIR have cunning ways of using golden handcuffs to keep customers loyal, Airpoints being one, electronic advice of sales another, grabaseat another, and wait there's more, lots of people like to try and build their status points too and enjoy the Koru lounge.
But wait there's even more...lot's of Kiwi's are quite simply parochial when choosing which airline to fly and are by default more happy than not to pick their own national airline whether they're a shareholder or not.
Of the circa 300m American's maybe only 10% ? of them have even heard of N.Z. and far fewer have heard of AIr N.Z. but little ol N.Z. will get plenty of tourism exposure from this major airline and growth running at over 10% from that country at present, will undoubtably increase further IMO. I don't see any reason to panic or lose sleep.
I think the odds of another dip to $2.40 are slim but I have my chequebook open if it does :)